By Rahul Shah
The Sensex came under fag-end selling pressure to close in the red for the sixth straight session as risk-off sentiment prevailed amid unabated selling by foreign institutional investors and concerns over inflation. This is the longest weekly losing streak for Sensex and Nifty in over two years since the run ended in April 2020. Sensex nosedived nearly 3000 points or 5.2% to close at 52794 and Nifty slipped over 900 points or 5.4% to close below 16000 at 15782 level. Domestic market is unable to sustain higher levels as concerns of consumer inflation (CPI) rose at the fastest rate in eight years in April due to higher food and fuel prices, fueling speculations that the Reserve Bank of India will further lift interest rates.
Moreover, continued FIIs selling, poor quarterly results and rising oil prices have negative impact on the market. FIIs were net sellers of nearly $3 billion or Rs 20000 crore during the week while DIIs were strong net buyers of over Rs 18000 crore. Global market continued on a southbound journey as Dow Jones and Nasdaq Composite fell over 2% each against the previous week close. High inflation in the US and the hawkish Fed has pushed up bond yields, negatively impacting global equity markets.
Among the major sectors, Metal index witnessed biggest losses this week (declined 14.3%) on account of US Dollar Index surged to 22-year high of 105. The yellow metal fell 8% from the recent high to a three-month low at $1824/ounce as investors favored the dollar as a store of value amid accelerating inflation and expectations for aggressive monetary tightening. Interest sensitive sectors like banks and the realty index declined by 6% and 9% respectively on the hope of RBI hiking further interest rates.
Bounce back this week?
Markets are expected to see a pullback this week after a sharp correction in last few trading sessions on account of being in oversold territory. Bargain hunting in the market may not be ruled out after Nifty Auto to Tech Index corrected by 20-25% from the recent peak. However, traders need to keep light position and avoid aggressive buying till clear trend emerges. RBI minutes of meeting will be announced on Wednesday while LIC IPO listing is likely to be on Tuesday. Overall, there was negative sentiment in the market on account of domestic inflation spiked to 8-year high and US Inflation surged to 40-year high. Soaring global inflation may hint towards aggressive rate hike by most of the global countries. India announced to cap on wheat exports and Indonesia announced a ban on palm oil exports to protect their inflationary pressure.
Rise in Covid cases in China, Russia-Ukraine geopolitical concern, spiked in oil price, surge in USDINR to new peak at $78, relentless FIIs selling, US Dollar Index over 20-year high may dent market sentiment. India’s merchandise trade deficit widened to $20.11 bn in April compared to $15.29 bn in the year-ago period driven by the higher cost of importing oil amid continued geopolitical concerns globally which indicated to elevated trade deficit. IMD says that the June-September monsoon will likely reach Kerala on May 27, earlier than the usual arrival date of June 1, it may positive sentiment in the domestic bourses.
In oversold territory
Nifty has been witnessing some weakness since the last few trading session and has been volatile while inching lower. It has formed a bearish candle on the daily and weekly scale which will keep the index under pressure. However, the momentum indicators are in extremely oversold territory on the daily scale so some pullback cannot be ruled out till the higher levels of 16250-16500 zones where there can be resistance faced. On the lower side the support is placed at 15600-15400 zones.
Ambuja cement: BUY
Target: Rs 380 | Stop loss: Rs 352
Ambuja Cement has given a trendline breakout on the daily scale and it has taken support at the 50 DEMA as well as the 38.2% retracement of the recent rise. It has formed a strong bullish candle at the support zone indicating buying interest in the counter. RSI oscillator is also positively placed on the daily and weekly scale. Considering the current chart structure, we advise traders to buy the stock for an up move towards 380 with a stop loss of 352.
Kotak Mahindra Bank: BUY
Target: Rs 1900 | Stop loss: Rs 1720
Kotak bank has formed base around 1700 zones and inched higher. It has given consolidation breakout on daily scale which has bullish implications. Stock has formed bullish candle on daily chart and supports are gradually shifting higher. RSI oscillator is also positively placed on the daily and weekly scale. Considering the current chart structure, we advise traders to buy the stock for an up move towards 1900 with a stop loss of 1720.
(Rahul Shah is the Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution, Motilal Oswal Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)